Good day, and welcome to today's CNH Conference Call and Webcast. At this time, I'll hand the call over to Jason Omerza. Please go ahead.

Thank you, Serge. Good morning and good afternoon to everyone. We would like to welcome you to the webcast and conference call for CNH Industrial's Fourth Quarter and Full-Year Results for the period ending December 31, 2022. This call is being broadcast live on our Web site, and is copyrighted by CNH Industrial. Any other use, recording or transmission of any portion of this broadcast without the expressed written consent of CNH Industrial is strictly prohibited. Hosting today's call are CNH Industrial's CEO, Scott Wine; and CFO, Oddone Incisa. They will use the material available for download from the CNH Industrial Web site. Please note that any forward-looking statements that we might be making during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material. Additional information pertaining to the factors that could cause actual results to differ materially is contained in the company's most recent report 20-F and EU annual report, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission, and the equivalent authorities in the Netherlands and Italy. The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures, is included in the presentation material. I will now turn the call over to Scott.

Thank you, Jason. And thanks, everyone, for joining our call. We finished 2022 with solid results as fourth quarter revenues were up over 27%, driving full-year consolidated revenues up 21%. Deliveries and product mix improved in both Agriculture and Construction. Our strength was broad-based, with double-digit year-over-year price realization coming from all regions. We expanded profit margins in both Agriculture and Construction despite significant input cost increases. The industry faced many other headwinds during the year, including a choppy supply chain, elevated freight costs, and ongoing inflation. Late in the year, these issues began to modestly improve. And we anticipate that will continue into 2023. The CNH team's creativity, hard work, and strong execution resulted in company records for both adjusted net income, up $2 billion for the year, and adjusted earnings per share, at $1.46, up 14% over 2021. We also generated $2 billion in free cash flow from industrial activities in the fourth quarter and $1.6 billion for the full-year as we over-delivered on our plans to complete and ship our accumulation of partially built units. This benefited our dealers and put us in a net cash position well ahead of our plan. Last year, we launched two potent margin improvement initiatives, the Strategic Sourcing Program, and the CNHI Business System, which we refer to as CBS. Continuous improvement is hard, especially in pursuit of breakthrough results. But our team has embraced this lean mindset, and is poised to deliver value across the business. Looking ahead, we remain focused on executing our strategy, including significant investments in out tech stack and product development. Derek Neilson and his team continue to drive exceptional performance, delivering a strong fourth quarter, with full-year net sales for the AG business up 22%. This growth was largely propelled by robust industry demand and…

Yes, thank you, Scott, and good morning, good afternoon to everyone on the call. So, fourth quarter net sales from Industrial Activities, of nearly $6.4 billion, were up over 27% net of adverse FX impacts. Full-year net sales of Industrial Activities, of $21.5 billion, were up 21% or over 24% at constant currency. Continued price adjustments were significant drivers for the top line growth in the quarter, and volume and mix also accounted for around 15% sales increase from Q4, 2021. Our Industrial segment's fourth quarter gross margin was 21.7%, and 22.2% for the full-year. The year-over-year margin improvement, of 1.5 points, is mainly due to strong and profitable growth in South America, and disciplined price realization globally, which more than offset rising productions cost. Q4 adjusted EBIT came in at $680 million, up $302 million from 2021, with a corresponding EBIT margin of 10.7%, a 310 business points improvement versus prior year. Full-year adjusted EBIT of Industrial Activities was $2.4 billion with a margin of 11.3%, up 140 basis points from 2021. Free cash flow from Industrial Activities was $1.6 billion in 2022, which turned our initial Industrial Activities net debt into a net cash position of $362 million at the end of the year, as Scott discussed in his introductory slide. Adjusted net income for the quarter was $486 million, up $61 million compared to prior year. This resulted in adjusted earnings per share of $0.36, up $0.05 year-over-year, and full-year adjusted EPS was $1.46. Adjusted net income for the quarter was affected by a higher tax rate due to discreet items booked in Q4. The full-year adjusted effective tax rate was about 28% mainly due to the jurisdictional mix of pre-tax profit with higher rates coming from South America. And we will likely see the tax rate…

Thank you, Oddone. Overall, demand continues to outstrip the industry's ability to supply at least in the near term, which despite record sales has actually dampened the industry levels. Spot commodity prices are trending down. But they are still generally above pre-2022 levels. And fortunately for farmers, fertilizers and other input cost are dropping as well. In North America, elevated farm incomes are sustaining demand for high horsepower tractors and combines. While small tractor demands has slowed from a lofty level seen over the past two years. We see the European Ag industry flattening as the macro-environment starts to impact equipment demand there. South America and Brazil in particular is a very good market for us. The business conditions in Brazil are inflexed following a presidential election. But we believe that the fundamentals are still positive for agriculture in the region. We also see good long-term opportunities in APAC. But this year will likely be slightly down. In construction, global demand is trending is lower. And we expect residential and commercial markets in North America and Europe to decline in 2023 due to rising interest rates. However, public construction spending at least partially fills in those gaps in United States. In Europe and South America, construction markets will be down in reaction to the overall macro-environment. We expect net sales of industrial activities to increase 6% to 10%. With confidence in the stickiness of our 2022 price increases, we expect to build on our margin gains by taking more cost out of our system. We are committed to growing market share. And we have the products, brands, and dealer network to do just that. Returning to full production in our North American plants will also help. Our SG&A as a percentage of sales remains one of the lowest in the…

Thank you, sir. [Operator Instructions] And our first question comes from Kristen Owen from Oppenheimer. Please go ahead.

Hi, good morning. Thank you for the question. Scott, you talked about some of the industry demand outlook for 2023, I was wondering if you could comment more on some of the order book trends that were outlined in the press release? If I recall, last quarter, you talked about some of the year-over-year declines being driven more by your intentional decision to keep order books relatively short. How far are you open now, and maybe just say more about how you view demand versus order levels for 2023?

Yes. As we talked about, the macro environment is -- it's choppy a little bit, and you see that in everything you read. But our order books really are not open. We haven't opened up Q4 in any markets yet, and we still are allocating. So, a lot of what's happening in the order book is our choice to allocate markets. I mean it's -- I'm not proud of the fact, but we have not delivered on a timely manner in much of 2022. The one market where we've been very clear is down is low horsepower tractors. So, we are seeing softness there. And I mentioned, I referred to the political situation in Brazil, it's really provide a -- just taking farmers, I think, are just taking a pause. We think the fundamentals in that market are incredibly strong; the world needs that agriculture production and they need equipment in order to do that. But we're just watching that very closely. But overall, Europe is a little bit slightly down, but we feel good about our ability to execute and keep that market relatively flat to the way it was in 2022. So, overall, I think the demand environment is better than I would have expected to be at this point. And we're really, I mean, running our factories as fast as we can and as much as we can through the year, and just being careful as we look at the fourth quarter. The fourth quarter is where we are being cautious at this point. We don't have orders for that yet, but where we have talked about it, I think we could open that up and probably book it very quickly.

Okay, that's helpful. And then just as a follow-up to that question, just how you're thinking about dealer inventory levels existing 2023, do you expect to produce in line with dealer inventories, builds, just any comments you have there?

We are still -- again with the exception of the low horsepower tractors, we are still below historical levels, and really, quite frankly, still below where most of our dealers would like us to be with our inventory. So, we're going to work to catch that up. We do not plan to get back to historical levels. We'd like to keep inventory relatively lean. It's careful balancing there, because you're running as fast as you can to provide shipments, and the market is going to slow down at some point. But no, we are not looking to push a lot more dealer inventory into the channel. We've got some dealers build that we've got to do just to give them acceptable levels of inventory. But our goal and part of what we're watching for is to make sure we protect dealer inventories going into 2024.

Great, thank you.

Thank you. Our next question comes from Steven Fisher from UBS. Please go ahead.

So, thanks. Good morning. Just on the Q4 order book point, just curious, Scott, why haven't you opened up the order books yet? And what will you need to see to fully open them up for Q4?

Steven, it really refers to, and again I'm not proud of the fact, just our inability to deliver in a timely manner. I mean, we've got the backlog, especially in our high horsepower tractors, that is quite long. And I think we're just trying to get more confidence in our ability to deliver. We -- again, inflation is -- it's not rising anymore, but it's still out there. So, we also are making sure we manage our cost. You know, Derek and Stefano are really doing a nice job of managing cost inputs in their business, but it's really that making sure we balance the cost-price equation, and you've seen from our history, we're really good at doing that. But also, ensure that we can deliver when we say we're going to deliver if we open up the books.

Okay, that's fair. And then, I guess, in terms of the AG margins for 2023, can you maybe just give us any color on the puts and takes there? I imagine there were a number of inefficiencies in production, in 2022, due to the strike and the supply chain, and then you have Precision AG mix should be helpful, I would think, for 2023. So, can you talk about some of those puts and takes, and then what you're expecting for price versus cost in 2023?

Let me take this, Steve. Yes, you predicted -- you pretty got it. I mean we expect 2023 to be a play of cost more than a play of pricing. We expect steel to be positive price over cost, as we have been throughout 2022. But the big game will be in getting cost out of the production system and reducing cost on to the production systems. And that's a combination of having a smoother supply chain, and a more organized cadence, and possibly getting some improvement in -- from our strategic sourcing program. That probably will kick in more at the end of the year rather than in the beginning of the year. But that's what we're looking at. And we have some carryover pricing for 2022 still coming in. And then you mentioned as well growing sales in tech, and which have generally higher margin than the pure equipment.

Okay, thank you.

Thank you. And our next question comes from David Raso from Evercore ISI. Please go ahead.

Hi, thank you. I'm just trying to square up the implied volumes. When you look at the price -- sorry, the revenue guide, of the 8%, I mean, currency shouldn't be that much of a drag at these levels. So, and it looks like it's mostly just price in the revenue guide. Is that the right way to interpret it, that basically volumes are flat? And if that is the case, if you can give us a little flavor where volumes up versus down just so we kind of square up any chance of overhead absorption?

Volumes are up slightly, modestly -- I don't know, slightly modestly defined there, but it's low single digits. North America is really where we see the greatest strength, and where we see the biggest backlog and where we've got the most work to do. So, I think that'll be the volume play there, to a great extent. And the rest of -- there's still lots of work to do to deliver in other areas of the world, but that really will be where most of the volume comes from.

And that's more of an -- large AG comment, and I know the units are bigger [multiple speakers] --

No, you go it. It's high horsepower tractors and combines, and in that order.

And Oddone, the comment about steel -- more about steel than price, and so I understood what you were implying there, do we still think our steel costs are up year-over-year more than price? And it's all wrapped in a thought around do we think gross margins can expand in '23? I just want to make sure I understand that [indiscernible] margin comment.

And I'm sorry if I wasn't clear. I was talking cost, so price over cost, in general. And cost includes raw material, but in general, cost, so all of our production cost.

But so -- so, price-cost expected to be positive for the year to margin?

Yes.

Neutral to margin?

Yes.

Positive margin?

Positive --

So, if volume is up a little bit and price costs should be net positive to margin. I assume we can infer from that gross margins are expected to expand?

Yes.

As well as SG&A grow slower than sales growth with -- at least that was in the guide. That correct?

That is exactly correct.

What we're looking at.

All right, thank you so much. And I appreciate the detail on delisting. Thank you.

And our next question comes from Jamie Cook from Credit Suisse. Please go ahead.

Hi, good morning. Nice quarter. I guess just two questions. Scott, given the performance that you've put up -- the positive financial performance you've put up, can you talk about how you're thinking about the AG cycle, and the implications for your 2024 financial target, whether you think there's upside there? And then, I guess, my second question, just an update on Raven and where we are relative to your synergy targets? Thank you.

Okay. Well, first of all, if you go back a year, to Capital Markets Day, we're obviously much -- 2022 played out significantly better than we expected. And unfortunately some of that driven by soft commodity prices impacted by the war in Ukraine, which we couldn't have anticipated. But overall, '22, and then as we look at '23, are both better than we had anticipated from that. But that's really market related, not our -- our performance is actually doing quite well. As we look at our 2024 targets, we obviously feel like we're on a path to do better in some areas, but we've got work to do in some areas. So, we feel like, generally speaking, we set ambitious targets, and we're on path to hit those. But we are -- I don't want to be a pessimist, but I just think '24 could be a -- we talked about, it could be a more difficult year. The AG cycle though, as I talked about in my prepared remarks, soft commodity prices are still at relatively good levels. And it looks like that could hold. And farmer income is still at elevated levels. And their -- their reluctance to pay taxes, and therefore their desire to by equipment still makes a good setup for the AG cycle. It won't stay positive forever, but we feel like, right now, we're not about to call that starting to turn negative in '23. As far as Raven concern, I'm honestly not sure I could be more positive on how well that integration has gone. We committed to a reverse integration because we like the team and we like the culture. And our team has embraced that. We are learning from their agile customer-focused system, and we're building on that, giving them the tools and resources. We've done a tremendous amount of hiring. And really, it's -- we talked about new Patriot sprayer that we brought out with full Raven capability. We'll embed their tools in everything that we can, going forward. But really, integrating them into our tech stack is where the real value unlock is. Huge aftermarket opportunities there, retrofit opportunities in Raven. But overall, I'm just really pleased with how the team -- both the Raven team and our team have done to bring value and overdrive on our synergy targets.

Thank you. We'll now move to our next question from Dillon Cumming from Morgan Stanley. Please go ahead.

Great. Good morning, guys. Thanks for the question. Just wanted to ask on some of the more producing credit margin improvement opportunities you mentioned. You called out the sourcing program and CBS starting to ramp in the quarter. I know Oddone mentioned it would still be a bit more back-half-weighted. But could you just maybe earmark kind of how much more of an opportunity that could be on more of a dollar basis or a margin basis, so just trying to get a sense of kind of quantifying what the tail end could be next year?

Yes. Well, remember, we actually are not -- our CBS and lean initiatives are not are not starting from nothing. And we've got a great history with WCM and pulling lean tools throughout the plant network. What we're looking to do is how do we deploy that in other areas of the business, and accelerate it in the plants. And I think that's what you'll see taking shape this year. And obviously, the -- that's -- the opportunity is quite significant, but what the teams are working on now is how do we just push back the cost input using various lean tools to get back to where costs were pre-pandemic. And that's a lot of heavy lifting. But Oddone referred to it, 2022 was the year of price, and 2023 is going to be a year of cost focus. And our lean tool will be a significant way that we get after that. But more importantly, it's a way we get after delivering value for customers. It's not about just taking cost out, we're going to use those tools to make quality better, to make delivery better, and overall, help us expand margins. The -- that's, I wouldn't say, short-term, but we can do those, that we did that -- some of that work in '22. We're accelerating the work in 2023, so a great opportunity, across the business, to use those tools to create value and expand margins. Strategic sourcing is a longer-in-the-tooth program. It's probably -- it got kicked off last summer and fall. We've got a strong team working through it. But that will show some results later this year, but really start to drive notable margin expansion in '24, and beyond. But both of those, I would say, near-term opportunities with our CBS initiatives, more significant long-term opportunities with strategic sourcing.

Okay, that's helpful color. Thanks, Scott. And then just with my follow-up on the Precision AG revenue target, I think, Oddone, you mentioned that you exited the year up 32%, you were originally guiding, at the Tech Day, it's up 11% in 2023. I know it's still a fairly recent target, but just given that exit rate, would you consider any upside to that $1 billion target for '23 at this point?

I will stick to that target for the time being.

Great, thank you.

The next question comes from Tami Zakaria from JPMorgan. Please go ahead.

Hi, good morning. Thank you so much. So, just to get some color on the volume expectation of low single-digit, is that higher for AG, call it mid single-digit, but negative for Construction, so that nets out to a low single-digit growth for the overall company. Is that how we should be thinking about it?

No, it's actually -- the Construction business and backlog is quite good. Despite a difficult overall environment, we had so many limitations last year in our ability to produce, that that business is actually reasonably good. So, both businesses will have positive volume in 2023.

Got it, that's super-helpful. And then second question, what kind of incremental margin should we expect in AG and Construction segment this year?

I will go to the -- I mean, in line with what the kind of incremental margins that we have had over time, and no big difference from that. Probably a little bit more on Construction because we have -- Construction was more affected by some of the cost headwinds this year, but for AG, I will use -- it would be pretty much in line what we have had in the past.

Got it. Thank you so much.

And our next question comes from Mig Dobre from Baird. Please go ahead.

Good morning. And following up on Construction here, I'm wondering if you can give us maybe a little more context around the order book here and the declines that we've seen in both heavy and light equipment. Are you limiting the order book in Construction similarly to what you've done with AG? And I'm also curious, and in your own outlook for 2023, for the industry, are you seeing, arguably, a little more pessimistic than some of your peers when framing 2023? So, again, color on that would be helpful as well.

Well, I -- I don't -- obviously, was busy this week, but I didn't really digest the [CAT] [Ph] numbers overall. But I don't remember them being overly positive on 2023. So, I think we're somewhat in line with what that was on the Construction side. Where we're really under-serving our dealer network with heavy excavators, and we're working diligently to improve that. So, that's a significant opportunity for us. But that's where some of the backlog reduction has been just because we cannot deliver in that area. On the light side, we've got just really good progress with Sampierana, and it will start to bring -- expand the markets where we can serve with that. But South America was very strong for Construction last year; we don't expect that to repeat. So, that market will be a little bit -- from a Construction side, be a little bit lighter than it was last year. But overall, again, it's going to be a positive year. Stefano and his team are doing a nice job with that business, and we like where it's going. And it's got a long-range upside for sure in that business.

Okay. And then if I can try the price-cost question as well. Looking on a consolidated basis, it looks like you've had positive price cost of about $180 million the past couple of quarters. And as you contemplate 2023, I'm wondering if this figure holds or if we should expect any significant variance from that?

No, directionally, we expect to be positive price-cost in 2023 as well. So, I wouldn't take much different view of what we are seeing. And in absolute terms those are going to be different, but I wouldn't take a much different view of what we have seen throughout 2022.

Great, appreciate it.

And our next question comes from Marta Bruska from Berenberg. Please go ahead.

Hi, good afternoon. Thank you for taking my question. And if you don't mind, please, it would be helpful to hear your thoughts on the pricing environment [indiscernible] so, specifically, given the industry, in the past, some of your competitors would hand out a steel discount where the raw had to start to normalize a little bit. But to my understanding, this haven't been the case in 2022. At this price, they're already positive [indiscernible]. I was just wondering whether you see anything at all that would suggest that this would change in 2023 or with the risk of some of your competitors giving -- or starting handing out steel discounts with the dealer, and how would you react to that? And then I had one more, please.

So, we are still expecting inflation to impact our business, and therefore our supply chain in 2023 to a lesser extent than it did in 2022, so a declining rate of inflation, but still seeing inflation. So, we've seen a decrease in some areas, but overall the cost that we're paying is not coming down. So, we don't intend and in fact, we're still going to have to price, going into 2023, again, at lower levels because of the lower increases. But we don't see a decrease in pricing. And that, again, that the quality and innovation that we're putting in our products would suggest that we don't need to go start competing on price. And I think the industry, overall, is likely going to take that approach.

Perfect. Thank you. And then I was just wondering with all the big tech cutting the workforce, were you able to benefit from the opportunity to cut into the tech talent pool for your Precision AG, kind of hiring from the pool, please?

That's actually something I have been pushing the team on for quite some time. I mean, we've -- we have done a significant hiring with our technical team, Precision and Autonomy. But many of the layoffs are not actually the programmers and engineers. So, we don't really see that as an opportunity. And we did most of our hiring in '22. We'll probably slow down a little bit. But to the extent that we can bring on great talent at more reasonable prices because of what others are doing. But certainly our commitment to accelerating value that our customers get from Precision and Autonomy is there. And we'll -- we are continuing to hire in '23. So, but no, there's not a significant opportunity for us there just because of where we're hiring and where those -- most of those employees are located.

Very clear, thank you.

Thank you.

Now our next question comes from Nicole Deblase from Deutsche Bank. Please go ahead.

Yes, thanks. Good morning, guys.

Morning.

Can we just start by talking a little bit about what you're seeing with respect to used equipment values, any signs of moderation at all from such high levels, in '22, within AG or Construction?

Used values are still hanging in there, just again because availability. And I'm not talking about low horsepower tractors because that's a different scenario, and we've seen that market stabilize at a lower. But at the high horsepower side and large AG, we're still not seeing large fleets anywhere in the OEM side or in the used side. So, prices are staying reasonably high.

Okay, got it, thank you. And just thinking about the quarterly cadence of earnings throughout '23 versus normal seasonality, I would kind of suspect that you would see a return to normal seasonality. But if there is anything you guys want to comment on to think about throughout the year, that would be helpful? Thanks.

No, I would say we will go back to the normal seasonality, which sort of we have seen in 2022 as well between production and retail sales. So, I would say, yes, going back to the normal.

Thank you. I'll pass it on.

Thank you. We will now take our next question from Timothy Thein from Citi. Please go ahead.

Yes, thank you. Yes, first, Scott, it's interesting these -- I think these order board comment in the releases is kind of taking a life of their own. But I'm just curios, how does Derek and team interpret that? There's so much -- seems to be so much noise just in terms of how the world has unfolded over the last year or so, and how you and others have shifted to an allocation mode. Just really getting at the underlying significance of these order boards in light of just all the issues around timing of deliveries, meaning, you know, how significant are they, I guess that's the nature of that question?

Yes, I would -- if I could call Derek up and getting on the call, I think you would hear a much more positive tone from him than how I think you are reading it. Obviously we are coming off an unprecedented demand, and I think we are seeing regional changes in that, but overall, the net portfolios are still reasonably good. The collection what used to have is, as you would open up the book and see it for an hour and we still see that in some markets, but generally speaking, it's slowing a little bit in Europe, in low horsepower tractors in almost all markets. But overall, I mean I think a lot of what we are seeing -- we didn't expect it, but the Lula election in Brazil really caused a lot of pause for farmers in a region, and that has been so good for us, and we expect it to be, but it's taken, I would call it a ,"Pause," in orders there. But overall, that market having just been there recently is very, very strong. So, I think it's a matter of timing, and we are trying to manage that properly. But I think Derek's managing the business extremely well, as you have seen by the execution, and that includes on the sales side to make sure that orders and retail orders come through, and he is not at all sounding an alarm, he is just putting the right measures in place to make sure that we deliver on a solid year in '23.

Got it, got it. And back to your earlier comments about this dealer, and again, I think the low horsepower market weakness, and I guess it gets pretty well telegraphed and known at this point, but just again, sticking to large ag, obviously far more significant from a bottom line perspective for CNH, the notion that dealer -- any sort of dealer stocking or restocking is likely not happening in '23. So, presumably that could pose some tailwind as we -- you know, '24 is long ways off, but that's still in front of the company as a whole. Is that a fair takeaway?

I think some markets will get back to reasonable levels of inventory, but I don't like -- I mean we want to be -- our goal, our intent is to make sure as we manage and protect our own cash flow that we do the same for our dealers, and so that takes discipline to do, and that's the discipline that we are going to have as we go through this. The end of the year was a little bit tricky for us, because it was so much very good work done to complete this in the significant fleet inventories we had literally all over the world, where we just were missing components and we needed to finish those get them build and tested out to dealers. And the team there has done a nice job with that, but it happens so much at the very end of the quarter, we ended up with more inventory in some places that has retail orders, the customers are going to pick it up right away, we just didn't get it there in time for that to happen. So, I think the end of the year inventories aren't really telling great stories, especially in North American market, where that was significant, but overall, we feel like there is just a tremendous opportunity for us to keep our factories running and produce for retails customers at this point, and possibly at the end of the year, start to get dealer inventories back, when I say, "Back up," it means it's up to acceptable levels, not up to historical levels.

All righty, thank you.

Our next question comes from Michael Feniger from Bank of America. Please go ahead.

Hey, Scott. Thanks for taking my questions. I believe you phrased that 2022 was the year priced, 2023 is the year cost, just wanted to understand this a little bit more. If you look at 2022, can you quantify some of the costs embedding the model attributed to premium freight transportation, just buckets that like cyclically won't -- that cost won't be elevated in 2023?

Well, you hit a big one, we have already seen it started to come down, being transportation cost, you know, just cargo boxes, all of that stuff. We've seen that start to give way. And way our contracts are we don't always see it right away. But nevertheless, that is - that's one. And overall, we are just not seeing the spike in prices. Again, inflation is there. We are dealing with it. I think team's proven our ability to manage that. Semiconductors have also come down. So, that's it. That are much reasonable or I guess acceptable level for us. But overall, prices are going to be higher for us in 2023. But when I talk about it, we are looking at the entire business portfolio. And saying what costs have be incurred through the pandemic. And then in response to pandemic where we had to ramp up so quickly to do our customer orders. And how do we get back to running the business very efficiently. And that's the work. When I talk -- we talk about cost, it's getting after that efficiency in all aspects of the business that we might have lost a little bit of during last couple of years.

Understood. And we just went through the order book comment, but you did also made a comment earlier I think to Jamie Cook about 2024 could be a more difficult year. Many economists actually in 2024 could -- they could be seeing the global economy expanding. So, I just wanted to narrow in on that a little bit. Why do you think 2024 can just become a more challenging year as you said?

Remember, we are significantly more exposed to the ag cycle than we are to the global GDP. So, we call it an ag cycle for a reason which means that it is not a flat line. And it doesn't go in one direction forever. And we have had a very high market, and I am not actually not at all talking about a peak year, but I am just saying we had a very strong market here. And I am acknowledging with other global inputs that may at some point impact ag demand. '24 may be a year that isn't as strong as others. I mean that's not a negative. It's not a negative comment. It's just a fact actually.

Alright, understood. Just to squeeze one last in like you did see this inflection in your industrial net debt, ahead of times, some of the cash generation from the business in '22. Just -- I know you are aggressively investing in a business. How can we think about the fact that you inflected on your industrial net debt ahead of time? And how should we think about that in terms of potentially share repurchases to kind of close maybe your valuation discount to peers? How you kind of look at that? I know you are aggressively investing in R&D and CapEx. But just lever to pull, how are you thinking of that?

So, let me take this one. We set very clearly our capital allocation priorities. We say that we are investing more in R&D, as you pointed out. We stepped up our dividend. In 2022, we went back in doing share repurchase at levels that probably we hadn't done in the past. We want to continue doing share repurchases in 2023. So, that's part of the mix that we have in there. And then, we also want to have some availability for some sort of M&A in particularly in the tech space if that helps profitable growth there.

Thank you.

Thank you, all. And now we have time for one final question, [indiscernible] from Goldman Sachs. Please go ahead.

Hi, thanks very much for taking my last question. I guess I just wanted to touch on cash. Your guidance for '23 sort of sees weaker cash conversion. So, I was wondering maybe you could just comment a bit more on what you are seeing there? And sort of what the moving parts are? Thank you.

Yes. Again, I'll use the opportunity to answer your question just to thank the team for delivering such strong cash flow in the fourth quarter, which gave us a reasonable for the year. We are expecting another billion dollar-plus I think to $1.3 billion to $1.5 billion range of cash flow in 2023. But we are spending several hundred million dollars more in CapEx. Again, part of our strategy is bringing new products to market that do allow us to have higher gross margins and gain market share. So, those things don't come free. So, we are going to spend more money to get that, and that's really the key driving factor of it. We will still be discipline with inventories and managing that, but that will be the differentiator between year-over-year cash flow generations.

Fair, thank you.

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.